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The Chicago-based pharmaceutical company that made headlines in 2016 for dramatically raising the prices of cheap skin creams has now filed for bankruptcy. The filing cites, in part, profit-scorching backlash from the price increases, the Chicago Tribune reports.

Further Reading

In September of 2016, Ars reported that the company, Novum Pharma, had repeatedly raised the price of an old, cheap skin cream, bringing its list price from $241.50 to $9,561 a tube—a 3,900 percent increase total. The cream, called Aloquin, is "possibly effective" for treating eczema and acne, according to the Food and Drug Administration. It's composed of a generic antibiotic and extracts from the aloe vera plant.

Novum raised Aloquin's price after acquiring the rights to it from Primus Pharmaceuticals in May of 2015. The company similarly raised the price of another skin cream, Alcortin A, to $7,142, the Financial Times reported at the time.

Those price hikes stemmed from Novum's trouble getting insurance companies to cover its creams, according to the Chapter 11 bankruptcy filing the company submitted to a court in Delaware February 2. Without insurance coverage, Novum's business was struggling, the filing explains. The price hikes were an attempt to correct the problem, but it backfired.

"These price increases, although necessary to support patient access commitments and ensure a minimum level of profitability for the business, led to public scrutiny regarding [Novum's] business model and further increased prescription rejection rates," Novum Chief Restructuring Officer Thomas O'Donoghue wrote in the filing.

The filing also said that manufacturing issues, a dispute with a wholesaler, and competition from generic creams contributed to the bankruptcy.

Further Reading

While the bankruptcy may seem like a victory in the battle to drag down soaring drug prices, Craig Garthwaite, director of healthcare at Kellogg School of Management at Northwestern University, did not have such an optimistic view. “I think we're seeing companies sensitive to announcing these price changes. I don't think we're seeing a wholesale change in behavior,” he told the Tribune.

I get doing that for epipens. You're a greedy piece of human trash, and want to leverage your quasi-monopoly on something that is a prerequisite to life and security for an appreciable percentage of the population.

With this, you don't have proof the product works, and there are alternative treatments. Just being a greedy piece of human trash isn't enough, you also have to be smart enough to not overleverage your possibly-worthless (for eczema; I assume the antibiotic is effective) placebo product.

I wish capitalism would bankrupt a few more of these greedy bastards. Unfortunately this is a one off occurrence. The US needs to change patent laws to allow earlier generic access if a company is screwing it's patients by asking exorbitant amounts of money for life saving drugs...

They constantly stress test price increases for a can of soda, and have found that once you hit a sweet spot, raising the price of a can results in a net lose, and (more surprisingly) lowering the cost dose not increase sales. If you remind people suger water is a complete waste of money, they just drink water.

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

We all want these things, but we seem to be unwilling to pay for them. "$200 for a PILL?!?". Yep, when you factor in the hundreds of scientists, thousands of tests, etc., etc., that come along with these things. Add in drugs going generic, and they don't have very long to just break even.

I agree drug prices CAN be crazy, but the general public has to be better informed about this stuff if we're going to have an effective conversation about drug prices and medical care in general. Gathering torches and pitchforks to burn everything down leads to NO drugs, and then what? Is that where we want to be?

This company failed because it didn't do R&D or even basic economic analysis: sales went down, so they hiked the price.

I wish capitalism would bankrupt a few more of these greedy bastards. Unfortunately this is a one off occurrence. The US needs to change patent laws to allow earlier generic access if a company is screwing it's patients by asking exorbitant amounts of money for life saving drugs...

From the article: "The filing also said that manufacturing issues, a dispute with a wholesaler, and competition from generic creams contributed to the bankruptcy.

Sounds like capitalism did bankrupt the greedy bastards, in combination with mismanagement and poor judgement.

Those price hikes stemmed from Novum’s trouble getting insurance companies to cover their creams, according to the Chapter 11 bankruptcy filing the company submitted to a court in Delaware February 2. Without insurance coverage, Novum’s business was struggling, the filing explains.

Is this saying that their product was too cheap (at $241.50) so insurance companies wouldn't cover it, so they raised the price hoping insurance companies would cover it? Is that how it works? Seems like insurance companies would cover it because it's cheap, like how some prescription plans provide generics for free or at low cost.

I wish capitalism would bankrupt a few more of these greedy bastards. Unfortunately this is a one off occurrence. The US needs to change patent laws to allow earlier generic access if a company is screwing it's patients by asking exorbitant amounts of money for life saving drugs...

From the article: "The filing also said that manufacturing issues, a dispute with a wholesaler, and competition from generic creams contributed to the bankruptcy.

Sounds like capitalism did bankrupt the greedy bastards, in combination with mismanagement and poor judgement.

I did miss that sentence when I scanned through the article. Good. This needs to happen more...

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

Try peddling that bullshit elsewhere. The price hikes are happening on drugs that have been on the market 10, 20 and sometimes 30 years. It is extortion pure and simple. The companies find niche drugs produced in small quantities without significant competition and raise the prices as a pure "fuck you and pay me" move. Even if a generic is possible in many cases none yet exists and they know it will take time for a company to get approval and it is a risky move other manufacturers may not want to take because they can just cut prices later.

What R&D costs? The company HAS NO R&D. The drug was in R&D and approved 20 years ago. Normally this bag of dicks move works but in this case it bankrupted the company so good riddance.

Those price hikes stemmed from Novum’s trouble getting insurance companies to cover their creams, according to the Chapter 11 bankruptcy filing the company submitted to a court in Delaware February 2. Without insurance coverage, Novum’s business was struggling, the filing explains.

Is this saying that their product was too cheap (at $241.50) so insurance companies wouldn't cover it? Is that how it works? Seems like insurance companies would cover it because it's cheap, like how some prescription plans provide generics for free or super low cost.

I would guess insurance companies were dropping coverage for their cream because it was too expensive and would only cover generic creams or other treatments.

Those price hikes stemmed from Novum’s trouble getting insurance companies to cover their creams, according to the Chapter 11 bankruptcy filing the company submitted to a court in Delaware February 2. Without insurance coverage, Novum’s business was struggling, the filing explains.

Is this saying that their product was too cheap (at $241.50) so insurance companies wouldn't cover it? Is that how it works? Seems like insurance companies would cover it because it's cheap, like how some prescription plans provide generics for free or at low cost.

It is more like they were having trouble getting insurance companies to cover it because it is a drug of questionable effectiveness (at any price). So in the face of falling sales volume they said well we will fuck over the consumer and jack up the price on the smaller volume.

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

We all want these things, but we seem to be unwilling to pay for them. "$200 for a PILL?!?". Yep, when you factor in the hundreds of scientists, thousands of tests, etc., etc., that come along with these things. Add in drugs going generic, and they don't have very long to just break even.

I agree drug prices CAN be crazy, but the general public has to be better informed about this stuff if we're going to have an effective conversation about drug prices and medical care in general. Gathering torches and pitchforks to burn everything down leads to NO drugs, and then what? Is that where we want to be?

$10,000 a tube for acne cream is not sustainable in any market. I am actually a great believer in the power of *functional* markets to result in reasonably good products at a good price. Price gouging for items like this at prices like this are indicative of a broken market.

Companies that actually do R&D absolutely have to be able to profit in order for there to be incentive. But, on the other hand, people have to be able to buy it in order for it to be worth it "for the general welfare" of the nation. Otherwise, there is no point anyway. No amount of insurance will make that work in the market.

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

We all want these things, but we seem to be unwilling to pay for them. "$200 for a PILL?!?". Yep, when you factor in the hundreds of scientists, thousands of tests, etc., etc., that come along with these things. Add in drugs going generic, and they don't have very long to just break even.

I agree drug prices CAN be crazy, but the general public has to be better informed about this stuff if we're going to have an effective conversation about drug prices and medical care in general. Gathering torches and pitchforks to burn everything down leads to NO drugs, and then what? Is that where we want to be?

The companies that are doing a lot of this like Novum or Turing are buying older drugs from other companies and jacking up the price. Mylan didn't develop the epipen, and the drug in it is incredibly cheap, but they have a patent on the delivery mechanism and the brand so they jack up the price. They aren't covering the cost of research, they're simply exploiting our shitty system.

Childish I know but that sums up my beliefs. I hope every investor, the board, and everyone involve loses every cent.

That's not how our 'capitalist' economic system works. They're already moving on to their next disaster project, golden parachutes ready and waiting once more. The only people who got fucked by this are the low-level employees who actually DID work.

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

Try peddling that bullshit elsewhere. The price hikes are happening on drugs that have been on the market 10, 20 and sometimes 30 years. It is extortion pure and simple. The companies find niche drugs produced in small quantities without significant competition and raise the prices as a pure "fuck you and pay me" move.

What R&D costs? The company HAS NO R&D. The drug was in R&D and approved 20 years ago. Normally this bag of dicks move works but in this case it bankrupted the company so good riddance.

Not talking about this company in particular, but the attitude remains the same: when pharma companies fail, people gather around to piss on the corpses. We don't differentiate, they're all bad in the public eye, because they charge money. Companies like this one DO suck, but a lot don't and yet they get painted with the same brush. You prove my point.

They also have the highest profit margins of any industry, even including R&D so clearly theyre still price gouging. Maybe you should educate yourself?

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

We all want these things, but we seem to be unwilling to pay for them. "$200 for a PILL?!?". Yep, when you factor in the hundreds of scientists, thousands of tests, etc., etc., that come along with these things. Add in drugs going generic, and they don't have very long to just break even.

I agree drug prices CAN be crazy, but the general public has to be better informed about this stuff if we're going to have an effective conversation about drug prices and medical care in general. Gathering torches and pitchforks to burn everything down leads to NO drugs, and then what? Is that where we want to be?

Edit: this is the one time I don't mind the downvotes, as it proves my point: people have a knee-jerk reaction to this stuff without understanding the ramifications of their behaviors. We already have known treatments for rare diseases that are NOT being manufactured because the costs outweigh the return, so people die. The more we demand cheap drugs... the more we'll get them.

Dumb comment made by dumber poster...

You do realize the article you are commenting on is regarding a company that purchased the product and then raised the price 3000+% right? No R&D cost, simply buying and then re-selling a product.

Now - also how about you look at the cost of most drugs in US vs. the cost the same companies sell them for overseas. Why is it so more expensive here?

Yes, companies need to make a profit, however the pharmaceutical industry isn't in it just to make a profit, they are in it to take every last cent they can from their customers until they're bled dry.

How about those Sacklers?

Stop it - pharmaceutical companies are ran by some of the greediest, scummiest people on Earth - and it sounds like you're one of them too

“These price increases, although necessary to support patient access commitments and ensure a minimum level of profitability for the business, led to public scrutiny regarding [Novum’s] business model and further increased prescription rejection rates,”

The cream, called Aloquin, is “possibly effective” for treating eczema and acne, according to the Food and Drug Administration. It’s composed of a generic antibiotic and extracts from the aloe vera plant.

Somebody please stop the American healthcare system. I want to get off.

(Just in case my writing is too opaque: Neither of those ingredients is expensive, combining them is not exactly rocket science, and on top of everything else, it's only possibly effective. For this, $9,500 a tube.)

Its funny that people are more than happy to watch these companies fail, while not understanding that the reason they're trying to raise prices is because drug R&D is expensive.

We all want these things, but we seem to be unwilling to pay for them. "$200 for a PILL?!?". Yep, when you factor in the hundreds of scientists, thousands of tests, etc., etc., that come along with these things. Add in drugs going generic, and they don't have very long to just break even.

I agree drug prices CAN be crazy, but the general public has to be better informed about this stuff if we're going to have an effective conversation about drug prices and medical care in general. Gathering torches and pitchforks to burn everything down leads to NO drugs, and then what? Is that where we want to be?

Edit: this is the one time I don't mind the downvotes, as it proves my point: people have a knee-jerk reaction to this stuff without understanding the ramifications of their behaviors. We already have known treatments for rare diseases that are NOT being manufactured because the costs outweigh the return, so people die. The more we demand cheap drugs... the more we'll get them.

You are getting downvoted because you are being a corporate brown-noser. No one debates R&D is expensive & no one thinks pharmaceutical companies are in this for altruistic purposes but the idea any price they put on a product must be fair is unreasonable, especially if it is a life-saving drug for which no alternative exists.

It is weird how you Yanks cannot seem to provide reasonable cheap medication for your citizens when the rest of the developed world has found ways. Watching AMericans fall into poverty because they are sick or injured is not a fun sight for the rest of us to watch.

Childish I know but that sums up my beliefs. I hope every investor, the board, and everyone involve loses every cent.

That's not how our 'capitalist' economic system works. They're already moving on to their next disaster project, golden parachutes ready and waiting once more. The only people who got fucked by this are the low-level employees who actually DID work.

In bankruptcy investors are going to lose. If they allow golden parachutes while losing their own money well they are stupid. Stupid people and their money are soon separated.